Tax is the main source of income for the government. The government uses the money collected from taxes for the development of the country. This money is also used to cover various expenses. These expenses include many things like paying salaries to government employees, building roads, spending on education, and more.

GST (Goods and Services Tax) was started to make the tax system easier. Apart from GST, we also have to pay different types of taxes as per the income tax rules. These include income tax, capital gains tax, etc. One such tax is also charged on gifts. The reason for charging gift tax is to stop people from hiding or misusing money by showing it as a gift.

Income Tax Rules on Gifts: Who Has to Pay and Who Doesn’t

The Income Tax Department has set a limit on gifts. If you receive a gift that crosses a certain value, you may have to pay tax. But there’s an exception — gifts from close family members are tax-free, no matter the amount.

How much gift is tax-free?

According to income tax rules, gifts up to ₹50,000 are not taxed. If the total value of gifts you receive in a financial year is more than ₹50,000, then the entire amount becomes taxable, not just the extra.

These gifts can be in any form, like cash, house, car, mobile phone, or even shares.

Gifts from friends or distant relatives are taxable

If you receive gifts worth over ₹50,000 from friends or distant relatives, you have to pay tax on them. This applies even if the gift is in the form of property or other assets.

Gifts from family members are not taxable

You do not have to pay any tax if you receive a gift from your family, even if its value is more than ₹50,000.

Who is considered ‘family’?

  • Parents
  • Husband or wife
  • Uncle and aunt (both paternal and maternal)
  • Brother or sister
  • Maternal uncle or aunt

Why are gifts from family members tax-free?

Gifts received from family are not taxed because they come under the income clubbing rules. This means the income from those gifts may be added to your income or the giver’s income, depending on the situation. But remember — if you later sell a gifted item like gold, shares, or property and make a profit, capital gains tax will apply on the profit earned.